Author丨Zhang Sainan
Editor丨Zhu Yimin
Semiconductor leader Wingtech Technology (600745. SH) is experiencing a double kill in both performance and stock price.
On the evening of April 22, the 2023 annual report released by Wingtech Technology showed that the operating income was 61.213 billion yuan, a year-on-year increase of 5.40%, the net profit attributable to shareholders of listed companies was 1.181 billion yuan, a year-on-year decrease of 19.00%, and the non-net profit was 1.127 billion yuan, a year-on-year decrease of 28.58%.
The data for the first quarter of 2024 released at the same time is not good. In the first quarter of this year, Wingtech Technology achieved operating income of 16.247 billion yuan, a year-on-year increase of 12.62%, and net profit attributable to shareholders of listed companies of 143 million yuan, a year-on-year decrease of 68.82%.
In the case of both last year and the first quarter of this year, the net profit declined, on April 23, Wingtech Technology's share price fell sharply at the open, and as of midday, it was reported at 31.57 yuan, with a market value of less than 40 billion yuan.
As for the reason for the decline in performance, Wingtech Technology attributed it to the weakness of the consumer electronics market. However, judging from other semiconductor companies that have released a quarterly report, there have been obvious signs of recovery in the first quarter.
Three major businesses suffered setbacks
From a mobile phone ODM foundry to a high-tech semiconductor manufacturer, Wingtech Technology's business story has been talked about by the market. Through mergers and acquisitions, Wingtech Technology's existing business has three major sectors: semiconductor business, product integration business and other businesses (optical-based), and it is a well-deserved semiconductor leader in the A-share market.
However, with the adjustment of the semiconductor cycle, the performance of this giant company has also been affected.
In 2022, the semiconductor industry as a whole will decline, and Wingtech Technology's net profit will fall by 44.16% that year. In 2023, the industry will continue to adjust, and Wingtech Technology will still not escape the impact of the cycle, with net profit falling by nearly 20% and non-net profit falling by nearly 30%.
From the perspective of business composition, the decline in semiconductor business and product integration business both caused a drag on the performance of Wingtech Technology.
During the reporting period, the company's semiconductor business achieved revenue of 15.226 billion yuan, a year-on-year decrease of 4.85%, accounting for 24.87% of total revenue, business gross profit margin of 38.59%, and net profit of 2.426 billion yuan, a year-on-year decrease of 35.29%. It said that due to macroeconomic and other factors, the global semiconductor market slowed down at the end of 2022 after a strong cycle of two years, and will remain weak from 2023 to early 2024.
Further subdivision, among them, the automotive field, including electric vehicles, is the main direction of Wingtech Technology's semiconductor revenue source, with revenue from this field accounting for 62.8%, a year-on-year increase of 22.95%. However, in the fourth quarter, affected by the global economy, the growth rate of semiconductor demand in the automotive field slowed down in stages. From a regional point of view, the company's semiconductor business revenue mainly comes from overseas, and in the fourth quarter, the demand for semiconductors in Europe and the Americas was weak.
Wingtech Technology's product integration business is the majority of its revenue, which is based on mobile phone ODM (foundry) and expands to tablets, laptops, IoT, servers, automotive electronics and other fields. In 2023, the revenue of this business will be 44.315 billion yuan, a year-on-year increase of 11.99%, accounting for 72.39%, with a gross profit margin of 8.37% and a net loss of 447 million yuan.
From the perspective of the reasons for the loss, it was mainly affected by the impairment of goodwill, and after deducting the impact of goodwill impairment of 494 million yuan, the product integration business will achieve profitability in 2023, an improvement year-on-year. In the fourth quarter, the decline in the performance of this business was mainly due to the upfront investment in notebook products, the sluggish demand in the consumer electronics market and the increase in product costs.
Wingtech Technology's other businesses are mainly in the optical sector, that is, the related assets of OFILM. However, at the end of November 2023, the company decided to stop producing optical module products for specific customers based on the latest business progress with specific customers, combined with changes in the market environment and the company's business plan. In 2023, the company's optical module business will have a net loss of 719 million yuan.
From this point of view, in 2023, the three major business segments of Wingtech Technology will all suffer from disadvantages. Along with it, the share price of Wingtech Technology has also been declining, especially at the end of the year, the stock price fell below 40 yuan, in the first half of this year, the stock price even fell below 30 yuan, and the market value also fell from more than 100 billion yuan to less than 40 billion, evaporating more than 60%.
The first quarter continued to decline
If 2023 is due to the sluggish performance caused by the adjustment of the semiconductor industry, but in 2024, many semiconductor companies have shown signs of recovery, why is the performance of Wingtech Technology still declining?
According to the first quarterly report, the company achieved operating income of 16.25 billion yuan, a year-on-year increase of 13%, and net profit attributable to shareholders of listed companies of 140 million yuan, a year-on-year decrease of 69%.
In terms of business, the semiconductor business achieved revenue of 3.42 billion yuan, gross profit margin of 31.0% and net profit of 520 million yuan. The product integration business achieved business revenue of 12.42 billion yuan, gross profit margin of 3.0% and net loss of 350 million yuan. Specifically, Wingtech Technology said that in terms of mobile phones, affected by the sluggish demand in the consumer electronics market, the price of new project products is low, and due to the cyclical impact of the upstream industrial chain, the price of some raw materials has risen, and the labor cost of the factory has risen, resulting in an increase in product cost and manufacturing cost. The relevant statements are the same as those in the annual report.
It is not difficult to find that whether it is the whole year of last year or the first quarter of this year, the loss of product integration business is the main sector affecting the performance of Wingtech Technology.
From the perspective of downstream demand, the shipment volume of the smartphone market declined for the second consecutive year, which inevitably affected Wingtech's mobile phone OEM business. IDC data shows that in 2023, global smartphone shipments will be 1.16 billion units, down 3.2% year-on-year, and China's smartphone market shipments will be about 271 million units, down 5.0% year-on-year, both shipment data have hit a ten-year low, and the global average replacement cycle has exceeded 40 months.
In order to reverse this unfavorable factor, Wingtech is also actively looking for new growth points. It mentioned in the financial report that in terms of mobile phones, it is jointly developing AI mobile phones with overseas customers, which has laid a good foundation for the company's ability to expand in the field of AI mobile phones, and at present, the company is actively assisting more customers to popularize AI into low-end mobile phones.
Wingtech also showed optimism about the market outlook, pointing out that with the improvement of economic conditions, key product categories such as smartphones and personal computers have stabilized and shown signs of recovery, according to the forecast of IDC and other institutions, in 2024, the global smartphone will end the year-on-year decline trend of the past two years, ushering in a single-digit percentage growth, of which the growth of emerging markets such as India and the Middle East and Africa is still expected to lead the rest of the world.
However, from the perspective of all parties in the market, the market is still hesitant about the full recovery of consumer electronics in 2024.
SMIC said that from the perspective of the entire market, the strength of the (downstream) demand recovery is not enough to support a strong rebound in semiconductors across the board. Canalys research analysts are also warning of risks: "Despite the positive market, smartphone manufacturers must keep a close eye on inventory levels. With the global inflation situation still uncertain, manufacturers are taking a cautious approach to inventory management to reduce the risk of oversupply and ensure financial stability. ”
From this point of view, Wingtech Technology, which has both semiconductor and mobile phone foundry business, will face a greater test.
SFC
Editor: Liu Xueying, Intern: Huang Lihong
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